Safe and Sound

First Trust and Savings Bank

Wheatland, IA
5
Star Rating
Founded in 1905, First Trust and Savings Bank is an FDIC-insured bank headquartered in Wheatland, IA. The bank has equity of $17.2 million on $169.1 million in assets, according to December 31, 2017, regulatory filings.

U.S. bank customers have $141.1 million on deposit at 6 offices in IA run by 32 full-time employees. With that footprint, the bank has amassed loans and leases worth $151.5 million, including $62.5 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, First Trust and Savings Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three key criteria Bankrate used to evaluate American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and provides protection for account holders when a bank is struggling financially. Therefore, when it comes to measuring an a bank's financial stability, capital is important. When it comes to safety and soundness, more capital is better.

First Trust and Savings Bank fell short of the national average of 13.13 on our test to measure the adequacy of a bank's capital, racking up 12 out of a possible 30 points.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. First Trust and Savings Bank's Tier 1 capital ratio was 10.95 percent, above the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather economic difficulties.

Overall, First Trust and Savings Bank held equity amounting to 10.15 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the effect of problem assets, such as past-due mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

Having a large number of these types of assets means a bank may eventually have to use capital to absorb losses, diminishing its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, resulting in depressed earnings and potentially more risk of a future failure.

On Bankrate's test of asset quality, First Trust and Savings Bank scored 36 out of a possible 40 points, falling short of the national average of 37.49 points.

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.93 percent of First Trust and Savings Bank's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's below the national average of 1.01 percent.

Banks maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . Comparing the size of that reserve to the total amount of problem loans can be a helpful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on First Trust and Savings Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. A bank can retain its earnings, boosting its capital buffer, or use them to deal with problematic loans, potentially making the bank more resilient in times of trouble. Losses, on the other hand, lessen a bank's ability to do those things.

On Bankrate's test of earnings, First Trust and Savings Bank scored 22 out of a possible 30, exceeding the national average of 15.12.

One important measure of a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by the total amount of equity. The most recent annualized quarterly return on equity for First Trust and Savings Bank was 12.36 percent, above the national average of 8.10 percent.

The bank earned net income of $2.1 million on total equity of $17.2 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 1.30 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above the average for U.S. banks of 1.00 percent.

WHAT IS SAFE & SOUND?

Bankrate.com's Safe & Sound Ratings provide a star rating system to evaluate the current financial status of financial institutions. The information gathered about banks, credit unions and thrifts is updated as set forth in the Terms of Use of Safe & Sound Ratings and Reports. The Safe & Sound Ratings information is grouped by categories of banks, thrifts and credit unions.

Scoring methodology

Bankrate.com evaluates the financial condition of institutions and assigns a one- to five-star rating for each with five stars representing the highest rating. Institutions with satisfactory performance will generally receive a rating of three or more stars. The majority of institutions fall into the three- to four-star range. An institution with an "NR" rating may be too new to rate or may have limited the publicly available information in their regulatory filings. The "NR" is not an indication of financial strength or weakness. The Safe & Sound rating is believed to be reliable, but the information is not guaranteed. In addition, events since the information was collected may have altered the institution's financial condition.